State Bank explains exchange rate adjustments

Nguyen Thi Hong, Deputy Governor of the State Bank of Vietnam (SBV), on August 19 met the media to explain the SBV’s decision to raise the interbank USD/VND exchange rate.
State Bank explains exchange rate adjustments ảnh 1The State Bank of Vietnam adjusted the VND/USD exchange rate two times within one week. (Source: VNA)

Nguyen Thi Hong, Deputy Governor of the State Bank of Vietnam (SBV), on August 19 met the media to explain the SBV’s decision to raise the interbank USD/VND exchange rate and adjust the trading band two times within one week.

The SBV official noted that the SBV increased the trading band of VND/USD from +/- 1 percent to +/-2 percent, on August 12 in response to the CHY’s devaluation of 1.9 percent on August 11, the biggest loss in two decades.

She said market changes in the following days showed the decision was a right one and was made at the right time. The adjustments were considered as appropriate with real conditions and received positive feedback from the public.

Nevertheless, the market still showed signs of concern over the possibility that the US Federal Reserve System (FED) will raise interest rate in the upcoming time, said Hong.

So in order to actively guide the market and get prepared for possible negative impacts, the SBV decided to raise the interbank exchange rate by 1 percent and expand the trading band by another one percent to +/- 3 percent, she said.

After two adjustments, the current exchange rate band provides enough room to cope with changes on the domestic and international markets, not only for this year but also for the early months of 2016, according to the SBV Deputy Governor.

With the goal of stabilising the market, the SBV has prepared all necessary measures and tools and is ready to sell foreign currency to keep the exchange rate and market stable within an established band.

Meanwhile, financial experts agreed with the State Bank of Vietnam (SBV)’s decision but also expressed their concerns about Vietnamese goods’ competitiveness, both domestically and globally.

Nguyen Tri Hieu, a banking-financial expert, welcomed the SBV’s decision and said that it helped calm the public and reduce the heating trading of foreign currencies on the free market.

At the same time, he thought the SBV would face a big challenge from now to the end of this year, as the world’s forex market will continue posing pressure on the exchange rate of VND, which is caused by many reasons beyond the SBV’s control.

It is necessary to keep a close watch on the market, said Hieu.

While agreeing with Hieu, Can Van Luc, an independent adviser to the Bank for Investment and Development of Vietnam (BIDV), said the SBV’s exchange rate adjustment largely depends on China’s exchange rate policy and the FED’s decision on interest rate.

Luc said the exchange rate adjustment reduced competitiveness of Vietnamese commodities both domestically and globally.

Nguyen Manh Hung, Chairman of the Board of Directors and General Director of Nafoods Corporation, said that the adjustment arrived at the right time and allowed enterprises to have some edge in exports.

Nguyen Ngoc Hung, business director of the Hi-Tech Seedling-Agricultural Materials joint stock company said the adjustment was having a negative impact on the company, whose export only makes up a small proportion of its business.

According to Cao Sy Kiem, Chairman of the Vietnam Association of Small- and Medium-Size Enterprises, manufacturing, export and import enterprises will face long-term difficulties.

He stressed that more fundamental measures are needed rather than depending on exchange rate adjustment to cope with changes in other countries’ monetary policy.

The Government, ministries and agencies need work together to cement domestic manufacturing and boost domestic consumption to overcome the challenges, Kiem said.-VNA


See more